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NAFTA, 12 years later…Workers are still waiting for the benefits to kick in

Date Posted: December 8 2006

A labor-backed research association published a study this fall revealing that adoption of the North American Free Trade Agreement (NAFTA) has had a "perverse" impact on the distribution of income, wealth, and political power across the continent.

The study, undertaken by the Economic Policy Association (EPI), studied the effects of the 12-year-old trade agreement, and found that "NAFTA has not lived up to its promise of better jobs and faster growth for Mexico, Canada, and the United States. Instead it has promoted an integrated continental economy with rules set by and for the benefit of the political and economic elite."

Jeff Faux, EPI Distinguished Fellow and author of The Global Class War, states in the
introduction, "NAFTA rules protect the interests of large corporate investors while undercutting
workers' rights, environmental protections, and democratic accountability. …The time for a
continent-wide debate over the future of this agreement, which was negotiated by and for the
rich and powerful in all three countries, is now overdue."

NAFTA is a trade treaty which eliminates customs duties on transactions between Canada, Mexico and the United States, creating the largest free trade zone in the world. Organized labor has consistently objected to NAFTA, and its sister agreement that covers Central America, because the agreements institute no pay, safety or environmental requirements on nations that sign on.

Here are some highlights from the study:

  • Americans were promised that NAFTA would generate large numbers of net new good jobs. Instead, over a million jobs that would otherwise have been created were lost, and wages were pressured downward for a large number of workers with less than a college education.
  • Mexican employment did increase, but much of it in low-wage "maquiladora" industries, which the promoters of NAFTA promised would disappear. The agricultural sector was devastated and the share of jobs with no security, no benefits, and no future expanded. The continued willingness every year of hundreds of thousands of Mexican citizens to risk their lives crossing the border to the United States because they cannot make a living at home is "in itself testimony to the failure of NAFTA to deliver on the promises of its promoters," the study said.
  • Working families haven't benefited in Canada, either. Except for those at the top, real incomes have virtually stagnated. Canadians were assured that NAFTA and the earlier Canada- U.S. Free Trade Agreement were necessary to save their social safety net. Yet a dozen years later, government transfers to individuals have dropped from 11.5% of GDP to 7.8% of the country's GDP.
  • Twelve years later, the study said, "it is clear that the costs to workers outweighed the benefits in all three nations." The process differed from country to country, and given the greater size and wealth of the U.S., the impact has not been as great as it was in Mexico and Canada. But the overall pattern has been similar. In each nation, workers' share of the gains from rising productivity fell and the proportion of income and wealth going to those at the very top of the economic pyramid grew.
  • Defenders of NAFTA have two main responses. One is that its damage to workers is exaggerated. Perhaps. But NAFTA was supposed to make things a great deal better for workers, not - even a little - worse. The second response is that the problems of inequality are largely the result of domestic policies and have nothing to do with globalization. Yet that ignores the enormous increase in bargaining leverage over workers that the ability to shift production out of the country, and then sell the products back home, gives the transnational corporation. With that leverage, corporate influence over economic policy has greatly expanded in all three nations since the agreement was signed.
  • The "vision" of NAFTA… pushes nations back toward a 19th century ideology in which government's economic function is to protect the interests of investors, while working people - the overwhelming majority in each nation - are left to fend for themselves.
  • Growing trade deficits with Mexico and Canada have displaced production that supported 1.01 million U.S. jobs since NAFTA took effect in 1994. The displacement of 1 million jobs from traded to non-traded goods industries reduced wage payments to U.S. workers by $7.6 billion in 2004 alone.
  • The lost job opportunities are distributed among all 50 states and the District of Columbia, with the biggest losers, in numeric terms: California (-123,995), Texas (-72,257), Michigan (-63,148), New York (-51,582), Ohio (-49,886), Illinois (-47,701), Pennsylvania (-44,173), Florida (-39,987), Indiana (-35,157), North Carolina (-34,150), and Georgia (-30,464).

As a share of total state employment, Michigan's workforce has been the hardest-hit in the nation since NAFTA's introduction.

"For over 12 years," the EPI report concluded, "we have been told by NAFTA's champions to be patient, that NAFTA's great benefits were just around the corner. We are still waiting. The time for a continent-wide debate over the future of this agreement, which was negotiated by and for the rich and powerful in all three countries, is now overdue."